dear all i have gone through a lot of articles and raised a lott of queries regarding this but i am unable to find a definite and satisfactory answer... my question is if i am a civil construction contractor i usually take government contract.... i purchase cement, steel , bricks n other material from registered dealer whether i will be able to take the itc for the material purchased to reduce my output tax liability ( i do not take services of a sub-contractor) or it is blocked credit as per sec 17(5).. please try to give a definite answer because i already have a lott of suggestions regarding this......
thanl you so much in advance....
No subcontracting- Since you are just purchasing materials such as cement, steel from other registered person, it does not fall in the definition of works contract as per section 2 (119) of CGST Act. Perhaps it could be concluded that you are not using subcontractor.
Further, if look at relevant portion of section 17(5)
[c] works contract services when supplied for construction of an immovable property [other than plant and machinery] except where it is an input service for further supply of works contract service;
[d] goods or services or both received by a taxable person for construction of an immovable property [other than plant or machinery] on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation.--For the purposes of clauses [c] and [d], the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
Hence we can draw following outcomes
1. You can avail ITC if such materials are used for construction of plant and machinery irrespective of the fact that no subcontracting was done.
2. If used for other than P/M- cannot avail ITC , since it is falling under 17(5).
3. It is pertinent to mention that govt dept. may deduct TDS if the provisions of section 51 are applicable.
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